A little less punishment, in exchange for the lifting of the vetoes: on Monday evening the EU countries reached an agreement with Hungary on an issue that has raged in recent months. With the decision, European member states slightly weaken a financial penalty for Hungary previously proposed by the European Commission. Hungary, for its part, has pledged to accept a major financial aid package for Ukraine (18 billion euros in loans) and a minimum tax for big companies, two dossiers it has long opposed.
The compromise means that an issue that has been hotly debated in Brussels in recent weeks has been resolved, at least for the time being. In September, Brussels proposed freezing €7.5 billion in EU subsidies for Hungary, due to serious and long-standing concerns about fraud and corruption risks. In response, Hungary has recently blocked some important European decisions. The conflict threatened to come to a head this week at a meeting of European heads of government on Thursday.
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Collision averted
But with an agreement, that collision has now been averted. Instead of the 7.5 billion the European Commission wanted to deny Hungary, EU countries are now reducing it to 6.3 billion. The official reason is that Orbán’s government has done its best in recent weeks with all sorts of new laws to strengthen the fight against fraud and corruption. But behind the scenes it is clear that it is above all the fear of Orbán’s ‘revenge’ that fueled the compromise.
At the same time, EU countries have also stepped up the pressure in recent days. This weekend it became clear that all 26 other EU countries would agree to a “plan B”, whereby funds for support to Ukraine could be raised even without Hungary. It would mean that Hungary would lose an important lever.
Part of the “deal” is also for EU countries to approve Hungary’s plan to request money from the corona recovery fund. Eventually, €5.8 billion can flow into Hungary as a result, but the conditions for that payment include strict requirements to strengthen the rule of law. The Netherlands abstained from voting on the plan.
Historically unique decision
The deal means that Brussels will once again impose a financial penalty on Hungary for corruption risks, a historically unique decision. But now that the sanction has been eased, Orbán can sell it at home as a victory for him over Brussels. The fact that Hungary’s recovery plan has now also been approved is also a victory for Budapest: that approval had been stalled for more than a year and a half due to concerns about the Hungarian rule of law. If the plan was not approved by December 31, Hungary would still lose 70 percent of “its” quota.
The billions that await us are of crucial importance for Hungary. The economy is in dire straits and the value of the Hungarian forint has recently plummeted. At the same time, it is still very uncertain when the first amounts can be transferred. The reforms that Brussels is asking of Budapest are substantial and, according to those concerned, still require important steps. Furthermore, the 6.3 billion now frozen cannot be released in this way: for this too, Hungary must significantly strengthen its fight against corruption.
